Big 5 bank loan programs for black entrepreneurs get off to a slow start

Lisa-Ann Geddes, owner of Vegan Delights restaurant in Whitby, Ont., initially approached another bank for a loan to open her new location, but became frustrated with their process. She then applied to the CIBC Black Entrepreneur Program in July.Christopher Katsarov/The Globe and Mail

Black entrepreneur loan programs at Canada’s big five banks have gotten off to a slow start, with institutions reporting they have approved few loans this year.

In the wake of the 2020 murder of George Floyd – a black man murdered by a white police officer in Minnesota – banks, the federal government and black business organizations have been discussing for months how to increase funding for black entrepreneurs , who disproportionately face systemic barriers to accessing capital. All parties nearly came together to form a new national lending initiative, but by the summer of 2021 the banks had retreated to design and run their own programs.

A new non-profit organization, the Federation of African-Canadian Economics (FACE), now administers the Black Entrepreneurship Loan Fund, the federal program.

Four banks – Bank of Montreal BMO-T in October, Canadian Imperial Bank of Commerce CM-T in January, Royal Bank of Canada RY-T in February and Bank of Nova Scotia BNS-T in June – launched loan programs to black contractors similar to the federal. The Toronto-Dominion Bank is expected to launch its own in the coming months.

However, the banks have come under fire from some black entrepreneurs over a lack of transparency about how these loans differ from banks’ other lending products and whether loans were actually made under their programs.

The Globe and Mail contacted each bank about the status of their programs. For the most part, the banks provided very few details.

BMO said it received nearly 100 applications from black contractors and approved several, although it declined to say how many. He also refused to provide interviews to anyone at the bank or to customers.

“We have received applications from interested entrepreneurs across the country and the approved loans represent a wide range of businesses representing a wide range of the economy, including the retail, service and transportation sectors and logistics,” BMO spokeswoman Kate Simandl said in an email. -mail.

CIBC would not give figures on its program. However, the bank and the Black Opportunity Fund – a nonprofit that works with CIBC and other institutions on how they work with black clients – connected The Globe with four black entrepreneurs who had received a loan or were in the final stages. of the application process.

Lisa-Ann Geddes, owner of Vegan Delights restaurant in Whitby, Ontario, is one such entrepreneur. She ran a take-out and plant-based restaurant-focused bistro in northern Ontario for seven years before moving south in March.

She said she originally approached another bank for a loan to open her new location, but became frustrated with their process. She then applied to the CIBC Black Entrepreneur Program in July. She said the experience was completely different and her loan officer was very responsive to her questions. She said she received a loan from the bank at the end of July and opened her restaurant last week.

“They were extremely helpful,” Ms Geddes said.

Austin Walters, senior director of inclusive client strategy at CIBC and head of their Black Entrepreneur Lending Program, described the program’s debut in January as a soft launch, with a full launch scheduled for this month.

The CIBC program offers 10-year loans ranging from $5,000 to $250,000 for equipment and leasehold improvements, and two-year loans ranging from $5,000 to $100,000 for working capital .

Mr. Walters said the bank had learned and adjusted its program over the past eight months in response to feedback from applicants. For example, he said, the bank is considering extending the term of its working capital loan and allowing applicants to pay interest only for the first year.

He said CIBC has also assembled a team of more than 50 people who work exclusively with black clients.

RBC declined to give many details about its lending program, but said it had “engaged” with thousands of black clients and entrepreneurs this year.

Greg Grice, executive vice president of corporate financial services at RBC, said in a statement that the bank is currently focused on providing business training and educational workshops to black entrepreneurs on topics such as managing cash flows. Treasury.

Scotiabank said it was too early to comment on its program, which launched this summer.

TD, which last year unveiled a strategy to improve customer service for black customers, said it would have more to announce in the coming months.

Many banks are working on their initiatives with the Black Opportunity Fund (BOF), an organization created in 2020 by a group of Black Bay Street executives.

Craig Wellington, executive director of BOF, said his group’s goal is to identify barriers that prevent black business owners from obtaining financing and to help them overcome these issues.

Progress on banks’ programs may seem slow, he said, but that’s only because of the time it takes to work with entrepreneurs to ensure their businesses are at a stage where they can make the most of it. financing.

He said many business owners had applied for funding before they were ready, and that was part of the reason for the high rejection rate of the government-funded Black Entrepreneurship Loan Fund.

He said he also saw banks making changes such as, in some cases, waiving personal guarantees required by borrowers. This is a hurdle that is statistically more likely to affect Black business owners, due to a lower ownership rate.

“We are confident in saying that the experience with banks for loans two years ago is very different from what it is today,” Mr Wellington said.

But many black entrepreneurs who spoke to The Globe say the criteria for granting loans under these programs aren’t always clear — especially not what differentiates them from the bank’s regular loan programs.

Grantley Othneil Adams, president of Lyve Lending Group, an Ottawa-based fintech that helps businesses find unsecured loans, said it was disappointing how little information banks would share about details and results. of their black entrepreneur loan programs.

“It’s a matter of trust,” he said. “I want to see transparency. I want to see numbers, in terms of the number of applications received and what percentage of them are approved and what percentage of them are refused. … I don’t know why these things are hidden.

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